- - Tuesday, September 3, 2013

ANALYSIS/OPINION:

Hiking magazine rates would hasten the Postal Service’s demise

Imagine walking to the mailbox, excited to see the latest pictures of that precious baby Prince George in People magazine. Or maybe you’re trying to understand whether the violence in Egypt was inevitable, or a “catastrophe of choice,” as The New Yorker calls it.

Even the Postal Service admits magazines and other periodicals are among the few remaining pieces of mail Americans actually look forward to receiving, with personal correspondence and bills increasingly sent online.

Envision opening your mailbox door and finding … nothing. That is the future awaiting the American public should the U.S. Postal Service foolishly choose to move forward with filing an emergency, or “exigent,” postal-rate increase as soon as Thursday. The proposed rate increase stretches the meaning of emergency to the breaking point, moving the U.S. Postal Service yet another step toward the long-feared death spiral of increasing prices and disappearing mail volume.

The exigency clause in postal law allows the Postal Service to raise rates above the rate of inflation. The provision was conceived after Sept. 11, 2001, and the subsequent ricin attacks to allow the Postal Service to recover from such devastating events. Congress intended the Postal Service to use this power only as what it deemed “an extremely limited safety valve” in instances for which postal management couldn’t reasonably be expected to plan.

So what is today’s “emergency”? One with a very long tail. It’s been well-known for years that the Postal Service has been losing money, brought on by operational inefficiencies, unreasonable fiscal obligations (like having to pre-fund billions of dollars’ worth of retiree health care 75 years into the future, when no other federal agency is required to do so), America’s preference for email over snail mail, and the growth of electronic bill payments.

While the situation is unwelcome, it’s hardly unanticipated. After all, concerns about the service’s oversized infrastructure have been raised for years.

A substantial hike in postage rates is not the solution. In fact, it is all but certain to aggravate the Postal Service’s problems. With technology providing cheaper ways to deliver content, a rate increase many times the rate of inflation would launch the Postal Service right into the vortex of a death spiral. Rather than trying to increase prices, the service needs to cut costs and right-size its infrastructure.

For the magazine business, a rate hike couldn’t come at a worse time. Publishers are finally beginning to regain their footing after the recession, but a double-digit hike in mail prices could cost the industry an additional $250 million per year. This increased cost could force magazines to close, cut back circulation, reduce the number of issues mailed per year, or redouble efforts to choose an alternative means of delivery, like digital distribution. All of these roads lead to lost business for the Postal Service.

Even as digital magazine circulation grows, publishers remain committed to the millions of readers who love to read magazines in print. Despite (or maybe because of) the iPad, the audience for magazines, but print in particular, has grown over the years. Closing magazines, limiting consumers’ choices, reducing frequency or cutting back on content is too big a price to pay for an unnecessary, inappropriate, counterproductive and even possibly illegal above-inflation postage rate hike.

Fewer magazines in the mail would also harm the Postal Service beyond reducing revenues and volumes. The “Mail Moment” study conducted by the Postal Service several years ago found that periodicals, including magazines and newspapers, are among the most desired type of mail the American public receives, second only to personal letters. A decrease in magazines will diminish the value of the mail overall, leaving consumers with less to look forward to in their mailboxes and further compounding the Postal Service’s financial woes.

Instead of raising prices to cover excess, the Postal Service must continue to cut costs and right-size its network. The postmaster general has made strides in several areas but some of the most needed changes require congressional action. Passage of postal reform legislation — the House introduced a reasonable and realistic solution this summer — would empower the Postal Service to finally overhaul the entire organization.

Long-term help is needed and can only be rescued through systemic reforms. Weak arteries cannot be fixed by Band-Aids. An emergency increase would only compound the problems of the Postal Service, harm the magazine industry and put the service in a situation so dire it may not be able to recover.

Instead of misusing a power afforded it by Congress to enact emergency rate increases, the Postal Service should use its resources to work constructively with the publishing industry, other mailers and Congress to enact meaningful reforms to reduce costs and improve the system’s long-term outlook. It’s high time for Congress to tackle the Postal Service’s woes and give it the means to save itself.

Mary Berner is president and CEO of the Association of Magazine Media.

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